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| Greek debt crisis: EU agrees €7bn loan as Germany backs new bailout talks - as it happened | Greek debt crisis: EU agrees €7bn loan as Germany backs new bailout talks - as it happened |
| (30 days later) | |
| 6.35pm BST | 6.35pm BST |
| 18:35 | 18:35 |
| Summary: EU agrees €7bn bridging loan, paving way for bailout talks | Summary: EU agrees €7bn bridging loan, paving way for bailout talks |
| Following a vote in favour of starting talks about a third Greek bailout in the German parliament, the EU has agreed to a €7bn, three month bridging loan for the country. | Following a vote in favour of starting talks about a third Greek bailout in the German parliament, the EU has agreed to a €7bn, three month bridging loan for the country. |
| This will allow Greece to make a €3.5bn payment due to the European Central Bank on Monday, as well as pay the €1.5bn arrears it owes to the International Monetary Fund. | This will allow Greece to make a €3.5bn payment due to the European Central Bank on Monday, as well as pay the €1.5bn arrears it owes to the International Monetary Fund. |
| Paying off the debt to the IMF would allow the fund to take part in a future bailout, although managing director Christine Lagarde repeated her call for debt relief. | Paying off the debt to the IMF would allow the fund to take part in a future bailout, although managing director Christine Lagarde repeated her call for debt relief. |
| In any case, the parliamentary votes and the bridging loan have paved the way for negotiations on a bailout of up to €86bn to begin. | In any case, the parliamentary votes and the bridging loan have paved the way for negotiations on a bailout of up to €86bn to begin. |
| But some less happy news from Greece, where emergency services are battling a series of fires around the country, fanned by strong winds and high temperatures. Dozens of people leaving their homes as the fires edge towards inhabited areas. More here. | But some less happy news from Greece, where emergency services are battling a series of fires around the country, fanned by strong winds and high temperatures. Dozens of people leaving their homes as the fires edge towards inhabited areas. More here. |
| In better news, it looks like Greek banks may well reopen on Monday after being shut for three weeks. | In better news, it looks like Greek banks may well reopen on Monday after being shut for three weeks. |
| On that note it’s time to close up for the day. Thanks for all your comments, and we’ll be back next week. | On that note it’s time to close up for the day. Thanks for all your comments, and we’ll be back next week. |
| Updated | Updated |
| at 11.25pm BST | at 11.25pm BST |
| 6.33pm BST | 6.33pm BST |
| 18:33 | 18:33 |
| There’s been some confusion about whether Greek banks will or will not open on Monday, but a senior banker has now said they will. Helena Smith reports: | There’s been some confusion about whether Greek banks will or will not open on Monday, but a senior banker has now said they will. Helena Smith reports: |
| After three weeks of being closed and with capital controls, banks will reopen on Monday, a senior finance official in Athens has said, ending speculation that they would remain shut for a while longer. | After three weeks of being closed and with capital controls, banks will reopen on Monday, a senior finance official in Athens has said, ending speculation that they would remain shut for a while longer. |
| Earlier in the day there were concerns that it would be technically too difficult to open branches without special preparation. But the official confirmed that lenders would re-open for specific operations barring foreign transfers. | Earlier in the day there were concerns that it would be technically too difficult to open branches without special preparation. But the official confirmed that lenders would re-open for specific operations barring foreign transfers. |
| “We are expecting a decree either later tonight or tomorrow with the specifics,” he told me. “What is sure is that they will only open for domestic banking operations, capital controls will still be in place for foreign transactions.” | “We are expecting a decree either later tonight or tomorrow with the specifics,” he told me. “What is sure is that they will only open for domestic banking operations, capital controls will still be in place for foreign transactions.” |
| But, he added, the government would facilitate cash withdrawals from ATMs by allowing customers to withdraw weekly amounts of 60 euro daily limits. Business transactions would also be fast-tracked in an effort to re-energise the economy. “No funds will be transferred abroad. Restrictions will be in place for at least six months although my gut feeling is that capital controls will probably last a lot longer.” | But, he added, the government would facilitate cash withdrawals from ATMs by allowing customers to withdraw weekly amounts of 60 euro daily limits. Business transactions would also be fast-tracked in an effort to re-energise the economy. “No funds will be transferred abroad. Restrictions will be in place for at least six months although my gut feeling is that capital controls will probably last a lot longer.” |
| 5.19pm BST | 5.19pm BST |
| 17:19 | 17:19 |
| With Greek bailout talks back on, former US Federal Reserve chairman Ben Bernanke says that Europe needs to hold up its end of the bargain: | With Greek bailout talks back on, former US Federal Reserve chairman Ben Bernanke says that Europe needs to hold up its end of the bargain: |
| Specifically, is the euro zone’s leadership delivering the broad-based economic recovery that is needed to give stressed countries like Greece a reasonable chance to meet their growth, employment, and fiscal objectives? Over the longer term, these questions are evidently of far greater consequence for Europe, and for the world, than are questions about whether tiny Greece can meet its fiscal obligations. | Specifically, is the euro zone’s leadership delivering the broad-based economic recovery that is needed to give stressed countries like Greece a reasonable chance to meet their growth, employment, and fiscal objectives? Over the longer term, these questions are evidently of far greater consequence for Europe, and for the world, than are questions about whether tiny Greece can meet its fiscal obligations. |
| Unfortunately, the answers to these questions are also obvious. Since the global financial crisis, economic outcomes in the euro zone have been deeply disappointing. | Unfortunately, the answers to these questions are also obvious. Since the global financial crisis, economic outcomes in the euro zone have been deeply disappointing. |
| He also points to the strength of the German economy as a problem: | He also points to the strength of the German economy as a problem: |
| Nobody is suggesting that the well-known efficiency and quality of German production are anything other than good things, or that German firms should not strive to compete in export markets. What is a problem, however, is that Germany has effectively chosen to rely on foreign rather than domestic demand to ensure full employment at home, as shown in its extraordinarily large and persistent trade surplus, currently almost 7.5 percent of the country’s GDP. Within a fixed-exchange-rate system like the euro currency area, such persistent imbalances are unhealthy, reducing demand and growth in trading partners and generating potentially destabilizing financial flows. | Nobody is suggesting that the well-known efficiency and quality of German production are anything other than good things, or that German firms should not strive to compete in export markets. What is a problem, however, is that Germany has effectively chosen to rely on foreign rather than domestic demand to ensure full employment at home, as shown in its extraordinarily large and persistent trade surplus, currently almost 7.5 percent of the country’s GDP. Within a fixed-exchange-rate system like the euro currency area, such persistent imbalances are unhealthy, reducing demand and growth in trading partners and generating potentially destabilizing financial flows. |
| ... Germany could help restore balance within the eurozone and raise the currency area’s overall pace of growth by increasing spending at home, through measures like increasing investment in infrastructure, pushing for wage increases for German workers (to raise domestic consumption), and engaging in structural reforms to encourage more domestic demand. Such measures would entail little or no short-run sacrifice for Germans, and they would serve the country’s longer-term interests by reducing the risks of eventual euro breakup. | ... Germany could help restore balance within the eurozone and raise the currency area’s overall pace of growth by increasing spending at home, through measures like increasing investment in infrastructure, pushing for wage increases for German workers (to raise domestic consumption), and engaging in structural reforms to encourage more domestic demand. Such measures would entail little or no short-run sacrifice for Germans, and they would serve the country’s longer-term interests by reducing the risks of eventual euro breakup. |
| He concludes: | He concludes: |
| I’ll end with two concrete proposals. First, negotiations over Greece’s evidently unsustainable debt burden should be based on explicit assumptions about European growth. If European growth turns out to be weaker than projected, which in turn would make it tougher for Greece to grow, then Greece should be allowed greater leeway after the fact in meeting its fiscal targets. | I’ll end with two concrete proposals. First, negotiations over Greece’s evidently unsustainable debt burden should be based on explicit assumptions about European growth. If European growth turns out to be weaker than projected, which in turn would make it tougher for Greece to grow, then Greece should be allowed greater leeway after the fact in meeting its fiscal targets. |
| Second, it’s time for the leaders of the euro zone to address the problem of large and sustained trade imbalances (either surpluses or deficits), which, in a fixed-exchange-rate system like the euro zone, impose significant costs and risks. For example, the Stability and Growth Pact, which imposes rules and penalties with the goal of limiting fiscal deficits, could be extended to reference trade imbalances as well. Simply recognizing officially that creditor as well as debtor countries have an obligation to adjust over time (through fiscal and structural measures, for example) would be an important step in the right direction. | Second, it’s time for the leaders of the euro zone to address the problem of large and sustained trade imbalances (either surpluses or deficits), which, in a fixed-exchange-rate system like the euro zone, impose significant costs and risks. For example, the Stability and Growth Pact, which imposes rules and penalties with the goal of limiting fiscal deficits, could be extended to reference trade imbalances as well. Simply recognizing officially that creditor as well as debtor countries have an obligation to adjust over time (through fiscal and structural measures, for example) would be an important step in the right direction. |
| The full version is here: | The full version is here: |
| Greece and Europe: Is Europe holding up its end of the bargain? | Greece and Europe: Is Europe holding up its end of the bargain? |
| 4.59pm BST | 4.59pm BST |
| 16:59 | 16:59 |
| Elsewhere in Athens of course, fires are raging. Here is a video showing emergency workers battling the blazes: | Elsewhere in Athens of course, fires are raging. Here is a video showing emergency workers battling the blazes: |
| Dozens of residents have been forced to leaves their houses as at least 80 fire engines and three aircraft try to stop the spread of the flames. | Dozens of residents have been forced to leaves their houses as at least 80 fire engines and three aircraft try to stop the spread of the flames. |
| MegaTV has confirmed the report that one person has died, said to be a tourist in Lakonia, affectec by respiratory problems from the thick smoke in the area. | MegaTV has confirmed the report that one person has died, said to be a tourist in Lakonia, affectec by respiratory problems from the thick smoke in the area. |
| Updated | Updated |
| at 5.03pm BST | at 5.03pm BST |
| 4.50pm BST | 4.50pm BST |
| 16:50 | 16:50 |
| Ahead of the reshuffle being announced, the Greek prime minister had a visit from nobel prize-winning economist Joseph Stiglitz. The US economics professor is holding talks with Tsipras, as I write, says Helena. | Ahead of the reshuffle being announced, the Greek prime minister had a visit from nobel prize-winning economist Joseph Stiglitz. The US economics professor is holding talks with Tsipras, as I write, says Helena. |
| His visit has elicited wry commentary in the Greek media that perhaps he might also be offered a job in the new cabinet. Stiglitz, like many US economists, has been scathing of Europe’s handling of the crisis and its emphasis on fiscal targets being met. | His visit has elicited wry commentary in the Greek media that perhaps he might also be offered a job in the new cabinet. Stiglitz, like many US economists, has been scathing of Europe’s handling of the crisis and its emphasis on fiscal targets being met. |
| Updated | Updated |
| at 4.50pm BST | at 4.50pm BST |
| 4.42pm BST | 4.42pm BST |
| 16:42 | 16:42 |
| Helena Smith | Helena Smith |
| Over in Athens our correspondent Helena Smith is hearing that the reshuffle is expected to be announced “any moment.” | Over in Athens our correspondent Helena Smith is hearing that the reshuffle is expected to be announced “any moment.” |
| The cabinet shake up is expected to see at least three government ministers moved. The energy minister Panagiotis Lafazanis, the deputy social security minister Dimitris Stratoulis and the deputy defense minister Kostas Isychos are all expected to go (the latter has already resigned). | The cabinet shake up is expected to see at least three government ministers moved. The energy minister Panagiotis Lafazanis, the deputy social security minister Dimitris Stratoulis and the deputy defense minister Kostas Isychos are all expected to go (the latter has already resigned). |
| The labour minister Panos Skourletis, a close ally of prime minister Alexis Tsipras, is also expected to step down with media reports suggesting he will be replaced by his deputy the US-trained Rania Antonopoulou. The deputy finance minister Nadia Valavani, who resigned earlier this week after describing the new bailout agreement as Greece’s tombstone, will also be replaced - along, rumour has it, with the government spokesman Gavriel Sakellarides. | The labour minister Panos Skourletis, a close ally of prime minister Alexis Tsipras, is also expected to step down with media reports suggesting he will be replaced by his deputy the US-trained Rania Antonopoulou. The deputy finance minister Nadia Valavani, who resigned earlier this week after describing the new bailout agreement as Greece’s tombstone, will also be replaced - along, rumour has it, with the government spokesman Gavriel Sakellarides. |
| Tsipras is keen to show he is in control and moving fast - so much so that the new cabinet will be sworn at around 7:30 PM according to the reports. Senior cadres this afternoon told me the aim was to inject new life into the government but none underplayed the task at hand. | Tsipras is keen to show he is in control and moving fast - so much so that the new cabinet will be sworn at around 7:30 PM according to the reports. Senior cadres this afternoon told me the aim was to inject new life into the government but none underplayed the task at hand. |
| Updated | Updated |
| at 4.49pm BST | at 4.49pm BST |
| 4.25pm BST | 4.25pm BST |
| 16:25 | 16:25 |
| Certain to encounter more problems - Dijsselbloem | Certain to encounter more problems - Dijsselbloem |
| We’re on the right track but it will not be easy. | We’re on the right track but it will not be easy. |
| That is the message from Eurogroup president Jeroen Dijsselbloem after the way was cleared for negotiations for a third Greek bailout to begin. In a statement He said: | That is the message from Eurogroup president Jeroen Dijsselbloem after the way was cleared for negotiations for a third Greek bailout to begin. In a statement He said: |
| “This agreement offers a chance to put the Greek economy back on track. | “This agreement offers a chance to put the Greek economy back on track. |
| “It’s not going to be easy. We are certain to encounter problems in the years to come. But I believe we will be able to resolve them.” | “It’s not going to be easy. We are certain to encounter problems in the years to come. But I believe we will be able to resolve them.” |
| Updated | Updated |
| at 4.26pm BST | at 4.26pm BST |
| 4.12pm BST | 4.12pm BST |
| 16:12 | 16:12 |
| And here’s the Eurogroup statement as promised: | And here’s the Eurogroup statement as promised: |
| The Eurogroup welcomes the successful completion of the relevant national procedures related to the decision to grant in principle a 3-year ESM stability support to Greece, and especially the recent swift legislative steps taken by the Greek parliament as a first step towards rebuilding trust. | The Eurogroup welcomes the successful completion of the relevant national procedures related to the decision to grant in principle a 3-year ESM stability support to Greece, and especially the recent swift legislative steps taken by the Greek parliament as a first step towards rebuilding trust. |
| Following a formal decision taken by the ESM Board of Governors, the institutions were entrusted with the task of swiftly negotiating a Memorandum of Understanding (MoU) detailing the policy conditionality attached to the financial assistance facility. | Following a formal decision taken by the ESM Board of Governors, the institutions were entrusted with the task of swiftly negotiating a Memorandum of Understanding (MoU) detailing the policy conditionality attached to the financial assistance facility. |
| In line with the Euro Summit statement of 12 July, the Eurogroup discussed the issue of possible short-term bridge financing to ensure that the Greek sovereign can clear its arrears to the IMF and to the Bank of Greece and honour its debt obligations in the coming weeks. In this respect, the Eurogroup welcomes the decision of the Council to grant short-term financial assistance to Greece, using up to EUR 7.16 bn of the funds still available under the European Financial Stability Mechanism (EFSM). | In line with the Euro Summit statement of 12 July, the Eurogroup discussed the issue of possible short-term bridge financing to ensure that the Greek sovereign can clear its arrears to the IMF and to the Bank of Greece and honour its debt obligations in the coming weeks. In this respect, the Eurogroup welcomes the decision of the Council to grant short-term financial assistance to Greece, using up to EUR 7.16 bn of the funds still available under the European Financial Stability Mechanism (EFSM). |
| In this context, the Eurogroup agrees in principle to transfer the 2014 SMP equivalent profits to be held at an ECB account to ensure legally enforceable rights to protect non euro area Member States from a risk of loss resulting from an EFSM programme to Greece. This will be confirmed by a letter from the President of the Eurogroup to the ESM. The SMP profits will be exclusively used either as compensation to non-euro area Member States in case of losses or will be returned to the euro area Member States, if not needed. Should Greece fail to repay the EFSM loan, the available instruments to recover the debt and protect the Union budget will be used, confirming that the risks of not concluding swiftly the negotiations on the ESM programme remain fully with Greece. | In this context, the Eurogroup agrees in principle to transfer the 2014 SMP equivalent profits to be held at an ECB account to ensure legally enforceable rights to protect non euro area Member States from a risk of loss resulting from an EFSM programme to Greece. This will be confirmed by a letter from the President of the Eurogroup to the ESM. The SMP profits will be exclusively used either as compensation to non-euro area Member States in case of losses or will be returned to the euro area Member States, if not needed. Should Greece fail to repay the EFSM loan, the available instruments to recover the debt and protect the Union budget will be used, confirming that the risks of not concluding swiftly the negotiations on the ESM programme remain fully with Greece. |
| The Eurogroup welcomes the very constructive approach taken by the non-euro area EU Member States. The Eurogroup commits to ensure proper transparency and to strengthen cooperation with the non-euro area EU Member States. The Eurogroup confirms that all matters of general application, including the EU budget and the EFSM, are to be discussed and decided upon in the Council involving all Member States. | The Eurogroup welcomes the very constructive approach taken by the non-euro area EU Member States. The Eurogroup commits to ensure proper transparency and to strengthen cooperation with the non-euro area EU Member States. The Eurogroup confirms that all matters of general application, including the EU budget and the EFSM, are to be discussed and decided upon in the Council involving all Member States. |
| 4.05pm BST | 4.05pm BST |
| 16:05 | 16:05 |
| The Greek cabinet reshuffle could come in the next few hours, local media are now reporting. | The Greek cabinet reshuffle could come in the next few hours, local media are now reporting. |
| 3.25pm BST | 3.25pm BST |
| 15:25 | 15:25 |
| There could be problems if the loan runs out before a new deal is reached, my colleague Jennifer Rankin points out: | There could be problems if the loan runs out before a new deal is reached, my colleague Jennifer Rankin points out: |
| If #Greece does need more bridge finance, will be harder to use #EFSM again. More pressure on eurozone to offer loans if ESM talks drag. | If #Greece does need more bridge finance, will be harder to use #EFSM again. More pressure on eurozone to offer loans if ESM talks drag. |
| 3.20pm BST | 3.20pm BST |
| 15:20 | 15:20 |
| And another development: | And another development: |
| At presser @VDombrovskis confirms #Greece bailout talks move back to Athens. Goodbye Brussels Group, hello troika. | At presser @VDombrovskis confirms #Greece bailout talks move back to Athens. Goodbye Brussels Group, hello troika. |
| 3.11pm BST | 3.11pm BST |
| 15:11 | 15:11 |
| Here’s Finland’s finance minister: | Here’s Finland’s finance minister: |
| ESM Board of Government and #Eurogroup conf call over. Official decisions imminent. We turn a page and move on. #Eurocrisis | ESM Board of Government and #Eurogroup conf call over. Official decisions imminent. We turn a page and move on. #Eurocrisis |
| Updated | Updated |
| at 3.12pm BST | at 3.12pm BST |
| 3.08pm BST | 3.08pm BST |
| 15:08 | 15:08 |
| And a Eurogroup statement is expected shortly: | And a Eurogroup statement is expected shortly: |
| Call ESM has finished, also call of #Eurogroup. Outcome first call on ESM website, statement #Eurogroup will be published shortly #Greece | Call ESM has finished, also call of #Eurogroup. Outcome first call on ESM website, statement #Eurogroup will be published shortly #Greece |
| Updated | Updated |
| at 3.10pm BST | at 3.10pm BST |
| 3.07pm BST | 3.07pm BST |
| 15:07 | 15:07 |
| And here is a statement from the European Stability Mechanism indicating that negotiations can now officially begin: | And here is a statement from the European Stability Mechanism indicating that negotiations can now officially begin: |
| The Board of Governors of the European Stability Mechanism (ESM) approved today a decision to grant, in principle, stability support to Greece in the form of a loan programme. This decision follows the completion of national procedures that involved parliamentary approval in some of the ESM Member States. The basis for the Board of Governors’ approval was the assessment by the institutions and the proposal by ESM Managing Director Klaus Regling. | The Board of Governors of the European Stability Mechanism (ESM) approved today a decision to grant, in principle, stability support to Greece in the form of a loan programme. This decision follows the completion of national procedures that involved parliamentary approval in some of the ESM Member States. The basis for the Board of Governors’ approval was the assessment by the institutions and the proposal by ESM Managing Director Klaus Regling. |
| This in-principle decision paves the way for the institutions to negotiate a Memorandum of Understanding (MoU) detailing the agreed macroeconomic reforms, or policy conditionality, linked to the ESM financial assistance facility. Simultaneously, the ESM Managing Director will prepare a proposal for the loan contract with Greece, the Financial Assistance Facility Agreement (FFA). | This in-principle decision paves the way for the institutions to negotiate a Memorandum of Understanding (MoU) detailing the agreed macroeconomic reforms, or policy conditionality, linked to the ESM financial assistance facility. Simultaneously, the ESM Managing Director will prepare a proposal for the loan contract with Greece, the Financial Assistance Facility Agreement (FFA). |
| Once the MoU is finalised, the Board of Governors must take a further decision, involving national parliaments in some Member States, to approve the MoU as well as the FFA proposal. The European Commission must sign the MoU. Finally, the ESM Board of Directors must adopt the FFA and agree to disburse the first tranche of the loan. | Once the MoU is finalised, the Board of Governors must take a further decision, involving national parliaments in some Member States, to approve the MoU as well as the FFA proposal. The European Commission must sign the MoU. Finally, the ESM Board of Directors must adopt the FFA and agree to disburse the first tranche of the loan. |
| Klaus Regling, ESM Managing Director, said: “We welcome that the Greek government and parliament voted in favour of the reforms with a very broad majority. This has paved the way for today’s decision in principle to start negotiations on a new programme for the benefit of Greece. Let me stress that thanks to reform implementation, Greece had started to grow again in 2014, unemployment had begun to decline, and the country had regained some market access. The ESM has a remaining lending capacity of €455 billion but only a small part of this sum will be needed. The ESM stands ready to provide financial assistance when our Members fully adopt an ESM programme.” | Klaus Regling, ESM Managing Director, said: “We welcome that the Greek government and parliament voted in favour of the reforms with a very broad majority. This has paved the way for today’s decision in principle to start negotiations on a new programme for the benefit of Greece. Let me stress that thanks to reform implementation, Greece had started to grow again in 2014, unemployment had begun to decline, and the country had regained some market access. The ESM has a remaining lending capacity of €455 billion but only a small part of this sum will be needed. The ESM stands ready to provide financial assistance when our Members fully adopt an ESM programme.” |
| Updated | Updated |
| at 3.27pm BST | at 3.27pm BST |
| 3.05pm BST | 3.05pm BST |
| 15:05 | 15:05 |
| And here’s how German MPs voted: | And here’s how German MPs voted: |
| How they voted: list of #German MPs on #Bundestag website #Greece https://t.co/yVplfadeb7 | How they voted: list of #German MPs on #Bundestag website #Greece https://t.co/yVplfadeb7 |
| 3.02pm BST | 3.02pm BST |
| 15:02 | 15:02 |
| Manfred Weber, leader of the centre-right European People’s Party, the biggest bloc in the European parliament, has welcomed the various parliamentary votes backing talks for a new Greek bailout. | Manfred Weber, leader of the centre-right European People’s Party, the biggest bloc in the European parliament, has welcomed the various parliamentary votes backing talks for a new Greek bailout. |
| But he warned it was only the start of a long and difficult process (which I think we probably already knew): | But he warned it was only the start of a long and difficult process (which I think we probably already knew): |
| National parliaments are behaving responsibly. Approval votes are good news. Europe stands together. @EPPGroup #Agreekment | National parliaments are behaving responsibly. Approval votes are good news. Europe stands together. @EPPGroup #Agreekment |
| But this is only the beginning of a long & complicated negotiation process. The Greek government has destroyed a lot of trust. #Greece | But this is only the beginning of a long & complicated negotiation process. The Greek government has destroyed a lot of trust. #Greece |
| 3.02pm BST | 3.02pm BST |
| 15:02 | 15:02 |
| But despite the loan agreement, and contrary to what had been suggested earlier, there are now reports that Greek banks will NOT now open on Monday. | But despite the loan agreement, and contrary to what had been suggested earlier, there are now reports that Greek banks will NOT now open on Monday. |